CFPB Clarifies Mortgage Servicing Rules

The Consumer Financial Protection Bureau released a bulletin on Tuesday to clarify some mortgage servicing rules that take effect in January 2014.

In the bulletin, the CFPB included guidance on home retention efforts after a borrower dies.

“The rules the CFPB issued in January require servicers to have policies and procedures in place to ensure that they promptly identify and communicate with family members, heirs, or other parties who have a legal interest in the home,” said a CFPB press release issued Tuesday.

“Today’s bulletin provides examples of such servicer policies and procedures, including allowing for continued payment on the mortgage as well as evaluating the heir (or whomever the legal interest in the home passes to) for assumption of the mortgage and, if appropriate, for loss mitigation measures,” the release said.

The bulletin further clarified the requirements for contacting delinquent buyers.

“The CFPB’s new rules require servicers to attempt contact with borrowers each time they miss a payment to provide important information that can help get them on track,” said the release. “Today’s bulletin clarifies that this requirement may be met through other contact that servicers have with such borrowers, for example, when evaluating them for loss mitigation or during collection calls.”

The method used to contact the buyer may vary depending on the length of time that he or she has been delinquent or if the borrower has responded to past live contact attempts.

“Even if delinquent borrowers have instructed servicers to stop communicating with them pursuant to the FDCPA, certain notices and communications mandated by the CFPB servicing rules and the Dodd-Frank Wall Street Reform and Consumer Protection Act are still required,” the bulletin clarified.

According to the guidance, servicers must communicate with the borrower about requests for information, loss mitigation, error resolution, force-placed insurance, initial interest rate adjustment of adjustable-rate mortgages and periodic statements.

“Servicers will not be required to provide certain early intervention contacts or ongoing notices of interest rate adjustments to delinquent borrowers who have instructed the servicer to stop communicating with them,” the CFPB release said.

Servicers are also not required to provide periodic statements to borrowers in bankruptcy, the bureau said.

“As servicing implementation enters its final phases, we heard from many sources that it was important to address these remaining issues to ensure a smooth transition and provide certainty to the market,” said CFPB Director Richard Cordray. “When mortgage servicers better understand the rules they have to follow, that is better for consumers.”

The interim final rule was scheduled to be released late Tuesday, the CFPB said.